Changing Engines of Growth in China： From Exports, FDI and Marketization to Innovation and Exports

This paper investigates the changing sources of growth in post-reform China. Using crossprovince regressions, this paper finds that, in earlier periods, exports, foreign direct investment and marketization were significantly related to per capita income growth, whereas＇ since the late 1990s, foreign direct investment and marketization have lost their significance and have been replaced by new sources of growth, such as innovation and knowledge, with only exports continuing to be important. This finding is robust after controlling for other variables representing other economic policies and provincial characteristics. We also tackle the possible endogeneity of innovation variables using the instrumental variables estimation method.     

Productivity Spillovers from FDI in China： Regional Differences and Threshold Effects

Economic theory posits numerous channels through which FDI might create positive spillovers for domestic firms. However, the results of empirical studies that have sought to document these spillovers have been mixed. One explanation for this variation is that the capacity of domestic firms to absorb spillovers might vary. In the present paper, we explore these issues in the case of China. ,4side from being one of the world＇s leading hosts offoreign direct investment, China makes for an interesting case study because its provinces vary greatly with respect to those factors most commonly held to influence absorptive capacity, such as the initial level of technology in domestic firms. This paper begins by empirically establishing that the spillovers from foreign direct investment do indeed vary across provinces. Threshold values for varioas factors that influence absorptive capacity factors are then estimated and it is found that conditions in many provinces presently fall short of these values. This provides an obvious focus of attention for China＇s policy-makers.     

Labor Quality and Inward FDI： A Firm-level Empirical Study in China

This paper investigates the relationship between labor quality and inward foreign direct investment (FDI) distribution in China using a large sample of Chinese cross‐sectional, firm‐level data, with comprehensive information about labor quality. The paper finds that labor quality measured by education level plays an important role in deciding the distribution of inward FDI, but labor quality measured by working certificates loses its significance using non‐parametric matching techniques and the instrumental variables and generalized method of moments technique. The author also finds that labor quality has a more significant impact on other foreign investments than Hong Kong‐invested, Macau‐invested and Taiwan‐invested firms. The impacts of labor quality on inward FDI are found to be strongly uneven across industries and provinces. Therefore, China should pay more attention to the education of employees in all foreign‐invested firms, and invest more in education to improve labor quality, which will help China to attract more FDI, especially technology‐intensive FDI.     

China＇s FDI Net Inflow and Deterioration of Terms of Trade： Paradox and Explanation

Starting from the contradiction between China's sustained growth in foreign direct investment (FDI) net inflow and deterioration of the terms of trade, this paper analyzes the characteristics of FDI sectoral structure since the 1990. Moreover, considering the international market competitive environment, this paper gives a concrete analysis of the influence mechanism and concludes that the flowing of FDI into labor‐intensive export sectors caused the deterioration of China's terms of trade. To improve its terms of trade, China needs to direct FDI inflow into capital‐ and technology‐intensive sectors and service sectors. (Edited by Xiaoming Feng)     

Exporting National Champions： China＇s Outward Foreign Direct Investment Finance in Comparative Perspective

We examine the extent to which Chinese development banks have financed the globalization of China＇s ＂national champion ＂firms： specifically, through outward foreign direct investment （OFDI）. We create a database of Chinese fnance for OFDI and compare our results to the existing literature and available data on Japan, Korea and other Asian nations. We estimate the total value of China＇s OFDI finance from 2002 to 2012 at US$14Obn. As a percentage of total OFDI, China＇s lending is roughly three times higher than Japan ＇s, the previous global leader in OFDl finance. We identify two major reasons for China＇s high （31 percent） ratio of OFDl lending to total OFDI. First, China has a greater incentive to give OFDI loans than Japan or Korea ever did because its borrowers are statelowned so it can more easily channel funds to targeted areas. Second, China has a greater capacity to give OFDI loans because it has significantly higher savings and foreign exchange reserves than Japan and Korea.     

China＇s Import-exchange Rate Linkage： Evidence from the China-bound Exports of Japan and Korea

This paper examines how the China-bound exports of Japan and Korea are related to exchange rates, motivated by the fact that processing trade makes up a large proportion of China＇s trade, and that Japan and Korea are the leading source countries for processing imports. Because processing imports are inputs for exports, the link between such imports and China＇s exchange rates are ambiguous. We estimate export functions that include China＇s RMB real effective exchauge rates （REER） along with bilateral real exchange rates （B RER） using Johausen ＇s cointegration method aud find that the RMB REER significantly affects Japanese and Korean exports to China, even more so than BRER in most cases examined. These two exchange rates appear in the export equations with opposite signs. Subsequently, we use the estimated model to illustrate the importance of accounting for a concurrent change in B RER when analyzing the effects of a hypothetical RMB revaluation on China＇s trade balances despite the apparently weak imports-B RER linkage.     

China and the Global Financial Crisis： Assessing the Impacts and Policy Responses

The present paper explores the role of China in the creation of the current global financial crisis and the impacts of the crisis on its economy. It argues against the view that the ＂saving glut＂ in China （along with other Asian emerging economies） played a significant causal role in the crisis. The global financial crisis did not engender much damage in China＇s financial structure, thanks to the relatively closed, bank-centered financial system. However, the impacts on the ＂real＂ side of the Chinese economy were hard felt. Growth and employment have fallen, largely due to the decline in exports and foreign direct investment. The crisis reveals the vulnerability of the export-dependent growth pattern. Policy responses of the Chinese Government, including monetary, fiscal and social policies, have helped to stem the downfall of the economy in the immediate term, but some of the policies have not addressed the structural problems of the Chinese economy and might well aggravate such problems over time. The present paper proposes a tentative reform blueprint to rebalance the economy and to sustain long-term growth.     

An Analysis of Tax Incentives to Attract FDI in Bangladesh： An Empirical Study

The purpose of the study is to understand whether it is still viable to use tax incentives to attract foreign direct investment （FDI） considering their effectiveness and costs to the country, and if not, what should be the alternative, effective, and viable means of promoting the vital FDI inflow. The study investigated various incentives provided by BOI, and other relevant sources available as secondary sources. However, the multinational enterprises （MNEs） are not attracting for investment in Bangladesh always with tax incentives and there are alternative means of attracting FDI such as direct financial grants, subsidies loan guarantees, etc. This paper focuses on tax incentives and the debate against the effectiveness and efficiency in attracting FDI.     

Financial Intermediation Development and Economic Growth： Does the Chinese Counterexample Exist？

In terms of the degree-of-freedom of bank loan decision-making, the ratio of loans of private enterprises and individuals to total loans is used to measure the development of China ＇s financial intermediation. Applying generalized method of moments estimation developed for dynamic panel data models, the present paper finds that the effect of financial intermediation development on economic growth is positive and statistieally significant when controlling for other variables, such as human capital foreign direct investment, securitization and foreign trade. The empirical results indicate that the concept of the so-called Chinese counterexample in financial development is questionable. Financial system reforms, including encouraging banks to operate independently, reducing or eliminating mandatory loans, and maldngfinancial decision-making more market-oriented, are important for China＇s economic growth.